It left investors and fund managers spending much of 2009 evaluating the impact of the downturn on the funds in a backdrop of low levels of activity. Even if new products were being launched, there was little appetite from investors to seek out new opportunities.
During this time many were also asking fundamental questions about how the non-listed property funds model needed to adapt to ensure that such a hard impact is not experienced again by the sector. This involved looking at how leverage should be employed, fee structures and the nature of the relationship and alignment between investors and fund managers.
One of the keys to working through these short-term and long-term issues is that of transparency and here Inrev (the European Association for Investors in Non-listed Real Estate Vehicles) continues to play a role. As the industry addresses the challenges of this market, Inrev aims to support the dialogue between investors and fund managers through events and training as well as supporting industry knowledge with a programme of research studies.
Two key tools in this drive are the Inrev Guidelines and the Inrev Index. The Inrev Guidelines is a common set of principles and recommendations to promote the transparency and governance of non-listed property funds. They also offer a compliance framework which enables fund managers to demonstrate their compliance and aid fund selection for investors and fund marketing for fund managers.
There continues to be an improvement in the levels of adoption by fund managers. A recent project on reporting best practice which analysed annual reports showed that 81% of the 2008 annual reports surveyed had adopted the majority of the Inrev Guidelines related to reporting compared to 73% in 2007. The number of funds applying at least three-quarters of the guidelines doubled from 20% to 43% over the year.
This year’s research was also notable for improvements in relation to those issues likely to come under scrutiny in this climate such as property valuations and debt disclosures.
In a difficult market, understanding and benchmarking performance is increasingly important. The Inrev Index is a benchmarking tool that publishes aggregate performance information on non-listed property funds. Interest in this tool has grown in the last two years, both due to challenging market conditions and also as Inrev work has seen the sample size and therefore the relevance of the results grow. The index now comprises 224 funds with a net asset value of €63bn.
For these two tools, Inrev is also improving accessibility to information for its members. As an industry association, Inrev sees the importance of making the information the industry contributes as useful as possible.
Two new online tools for the Inrev Index allow members to contribute performance data via a secure section of the Inrev website. Results are then delivered through a search tool that enables members to create their own sub-indices, including vintage, gearing, size, style and structure. Users can choose the output they would like to see (eg, total return results, capital growth, country/sector allocations, etc) as well as the currency in which they would like to see the results.
An online version of the Inrev guidelines is also in progress where they will be reformatted as a searchable website. Users can choose to explore relevant sections and be guided to further supporting material, tools and enablers, like a self-assessment tool that allows members to compare their annual report to the reporting sections of the Inrev guidelines. The development of supporting tools includes Q&As and best-practice examples and will further aid adoption as industry participants can learn from the best practice of others.
The period of correction in the assets values has brought difficulties to many participants in the industry and they continue to work through the consequences. However, for the long term it has brought a useful period of reflection to understand how an industry that is not much more than a decade old can continue to adapt with transparency and best practice in mind.
• Andrea Carpenter is interim CEO at Inrev – The European Association for Investors in Non-listed Real Estate vehicles
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